The Aston Martin Lagonda (LSE:AML) share price is down 51% over the past year. It hit fresh 52-week lows earlier this month when it traded at 700p. Despite a small rebound to 912p, the Aston Martin share price desperately needs a catalyst if a sustained rally is to be seen. Below are three points that I think could potentially provide this.
The drive towards electric
After the success of electric vehicle (EV) stocks last year in the US, it’s clear that there’s demand for an EV focus both from investors and also from consumers. Aston Martin has got the message here, recently announcing a partnership with UK battery technology firm Britishvolt.
The aim here is to work together to get a fully electric vehicle out the door by 2025. Although this is still a long way away, it shows me the strategy and direction of the business. Catering to this growing market should enable Aston Martin to stay relevant and ultimately grow sales from this revenue line. As more news comes on the EV side, I think the Aston Martin share price could lift with the positive outlook.
Mixing new releases with cash cows
A cash cow is a particular product that produces good revenue for a business over a long period of time. The Aston Martin SUV (the DBX), is expected to be a cash cow. In the recent 2021 full-year results, it showed that over 3,000 DBXs were delivered in the first full year after release. It said that the vehicle achieved an estimated 20% market share.
Having a stable revenue generator going forward should help to ease pressure on the finances that have hampered the business (and the Aston Martin share price) for several years.
Aside from this, the company is also seeing strong demand for limited edition runs. These can often be sold at a high profit margin, with the premium attached due to the exclusive nature. Over the next year, there are several of these expected, including the last Aston Martin Vantage with a V12 engine.
A breakeven target to help the share price
The final catalyst that could really help the share price is if the business posts an operating profit. It’s getting close, with the full-year 2021 operating loss being £76.5m. This shrank massively from the 2020 figure of £322.9m. The pandemic did hit the business hard, but the rebound is visible. If 2022 starts well then investor optimism around the prospect of making a profit will rise.
There are risks though. Net debt increased between 2020 and 2021, which is a worrying sign. Further, the new car editions this year will need to be marketed and advertised extensively, causing costs to rise. This could put pressure on profitability.
On balance, I think there are several catalysts for the Aston Martin share price to outperform this year. However, before I consider buying shares, I want to see some more evidence to support my thinking.
